The Superintendent issues this Decision and Order in the above-captioned
consolidated proceedings.

I. PROCEDURAL HISTORY

On August 2, 2002, Anthem Blue Cross and Blue Shield (Anthem)
and Maine Partners Health Plan (Maine Partners) (Anthem and
Maine Partners sometimes collectively referred to as the Applicants)
submitted for approval by the Superintendent proposed revised rates for
certain of the Companys individual health insurance products. Specifically,
Anthem proposes revised rates for its HealthChoice products that will
produce an average increase of 7.1% for approximately 28,000 current enrolled
members. The specific rate revisions range from a decrease of 13.3% to
an increase of 14.7%, depending on deductible level and type of contract.
Anthem proposes revised rates for its Individual HMO products that will
produce a rate increase of no greater than 25.8% for approximately 200
current enrolled members. Anthem requests that these rate revisions become
effective on January 1, 2003. Maine Partners proposes rates that are 95%
of the proposed rates for Anthems Individual HMO Standard and Basic
products. Maine Partners proposes revised rates for its Individual HMO
products that will produce a rate increase of no greater than 25.8% for
approximately 75 current enrolled members. Maine Partners requests that
these rate revisions become effective on January 1, 2003.

On August 23, 2002, the Superintendent issued a Notice of Pending Proceedings
and Consolidated Hearing. The purpose of the hearing is to consider whether
the revised rates proposed by Anthem and Maine Partners are excessive,
inadequate, or unfairly discriminatory as set forth in 24-A M.R.S.A. §
2736, and otherwise meet the requirements of the Maine Insurance

Code and regulations promulgated thereunder. In accordance with the
provisions of 5 M.R.S.A. § 9052, notice to the public was accomplished
in the following manner:

(c) Mailed the Notice on August 30, 2002, to persons who previously
requested to be placed on a Bureau-maintained interested person
list concerning healthcare issues, including all members of the State
of Maine Legislatures Joint Standing Committee on Banking and
Insurance, and the members of Maines Congressional Delegation.

In addition to the foregoing, as required by the provisions of 24-A
M.R.S.A. § 2735-A, on or around August 29, 2002, the Applicants provided
direct written notice by mail to every affected policyholder advising
them of the proposed rate increase and pending proceedings and hearing
in this matter. The Superintendent is also aware of certain newspaper
and trade press articles regarding the Applicants rate filings that ran
in the Portland Press Herald (August 9 and September 10, 2002), Bangor
Daily News (August 10, 2002), Kennebec Journal/Waterville Sentinel (August
16, 2002), and Insurance Times (August 20, 2002).

Consumers for Affordable Health Care (CAHC) and Senator
Sharon Anglin Treat on behalf of her constituents in Senate District 18
(Senator Treat) submitted applications for intervention. The
Superintendent granted permissive intervention to CAHC pursuant to the
provisions of 5 M.R.S.A. § 9054 (2) as an interested person with full
party status.[1]
The Superintendent also granted the late-filed application to intervene
of Senator Treat with the finding of an interested person with full party
status pursuant to the provisions of 5 M.R.S.A. § 9054 (2).[2]

On September 24, 2002, the Superintendent issued a Procedural Order
that, among other matters, established certain deadlines in the proceedings.

The Superintendent issued a First Discovery Request on September 11,
2002, a Second Discovery Request on September 27, 2002, and Oral Information
Requests on October 17, 22, and 23, 2002.CAHC issued its First Discovery
Request on October 1, 2002.[3] The Applicants filed written objections
to portions of CAHCs discovery that was ruled on by Order of the
Superintendent issued October 4, 2002. Following CAHCs motion for
reconsideration of the Superintendents discovery Order, the Superintendent
issued a further discovery Order on October 10, 2002. Senator Treat did
not issue any discovery.

On October 8 and 9, 2002, CAHC and Senator Treat, respectively, filed
motions for enlargement of time and to establish an advocacy panel. The
Applicants opposed the motions. The Superintendent issued Orders on October
9 and 10, 2002, respectively, granting in part and denying in part the
motions of CAHC and Senator Treat. Specifically, the Superintendent granted
an enlargement of time and denied the establishment of an advocacy panel.
Following CAHCs motion for reconsideration of the Superintendents
denial of an advocacy panel, the Superintendent issued a further Order
on October 16, 2002, upholding the prior ruling.

Following motions by the Applicants for confidentiality protection for
certain proprietary commercial and/or trade secret information the Superintendent
issued Protective Orders on September 19 and 24, 2002, October 18, 2002,
and an oral ruling on confidentiality at the public hearing on October
28, 2002. The Applicants asserted the information was proprietary because
its disclosure would benefit competitors; reveals methodology and information
that goes into calculating rates; and/or reveals the Companys internal
financial data. Neither CAHC nor Senator Treat opposed the Applicants
requests for confidentiality nor sought reconsideration of any Protective
Order or ruling on confidentiality made by the Superintendent.

On October 16, 2002, the Applicants submitted the prefiled testimony
and exhibits of its witnesses James Parker, Vice President and General
Manager of Anthem; William M. Whitmore actuary of Anthem; and Mark Talluto,
Director of Sales for Anthem in Maine and for Maine Partners. That same
day, CAHC submitted late-filed prefiled testimony and exhibits of witnesses
Nedra Foster and Ward Webster. Senator Treat did not submit any prefiled
testimony or exhibits.

On October 17, 2002, the Applicants submitted a motion for order clarifying
scope of proceedings, for which CAHC submitted its response on October
18, 2002. The Superintendent addressed the motion and responded orally
on the record on the first day of the public hearing (October 22, 2002).
[4]

At the public hearing held in Augusta, Maine, on October 22, 23, and
28, 2002, members of the public were provided an opportunity to make either
sworn or unsworn statements for consideration by the Superintendent in
the proceedings. Twelve (12) individuals provided such oral statements.
The Superintendent also received approximately ninety-five (95) public
written comments. Testimonial evidence of the Applicants witnesses
was presented at the public hearing, as was the following documentary
evidence that was admitted into the record:

EXHIBIT

REFERENCE

Hearing Officer Exhibit 1

The Applicants responses to all discovery issued in the proceedings
(portions of which are confidential)

Hearing Officer Exhibit 2

Written public comments comprised of approximately ninety-five (95)
letters received from consumers

The public hearing concluded on October 28, 2002, and the record was
closed at that time.

II. STANDARD OF REVIEW

Anthem and Maine Partners are required pursuant to the provisions of
24-A M.R.S.A. § 2736 (1) to file with the Superintendent proposed policy
rates for their non-group health insurance products. Anthem and Maine
Partners bear the burden of proving by a preponderance of the evidence
that the proposed rates are not inadequate, excessive, or unfairly discriminatory.
In addition, Anthem and Maine Partners are required pursuant to the provisions
of 24-A M.R.S.A. § 2736-C (5) to show that in accordance with accepted
actuarial principles and practices their proposed rates should yield a
loss ratio of at least 65%.

III. DISCUSSION

A. Rate Making Methodology

The Superintendent makes the following observations regarding the rate
making methodology used by Anthem:

The Superintendents Decision and Order on the Applicants
2002 rate filing in Docket Nos. INS-01-2532 and INS-01-2534 required
that:

[Anthem] and [Maine Partners] shall include in all future rate filings
projected changes in enrollment and shifting from one plan to another
and an analysis of the impact that these changes will have on the experience.

Although this analysis is included in Applicant Exhibit XIV to its
filing (Applicant Exhibit 6), which showed that projected plan shifts
would result in a lower loss ratio, the Applicants did not use this
information in determining the proposed rates.[5]

The subsidy from HealthChoice to HMO was determined to be revenue-neutral
only if enrollment is static. Since the Applicants actually anticipate
increased enrollment in HealthChoice (increasing the subsidy dollars
collected) and decreased enrollment in HMO (decreasing the subsidy dollars
applied), the subsidy would not be revenue-neutral and would result
in increased profit.

As noted in the Superintendents discovery requests and as highlighted
in the closing statements of both intervenors, the Applicants
various Exhibits and Schedules were not prepared on a consistent basis.
It may be appropriate to use different assumptions for different purposes,
but both the assumptions and the purposes need to be made clear. Better
documentation would facilitate the review of rate filings and minimize
the need for extensive discovery.

B. Trend

A significant assumption used for determining rates is the trend factor.
This factor represents the anticipated increase in claim costs from the
experience period (the most recent period for which claims experience
is available) to the rating period (the period in which the proposed rates
will be in effect). The experience period relevant to the Applicants
filing is the 12-month period ending March 31, 2002. The evidence in the
record demonstrates that the process used by the Applicants to estimate
the trend factor was actuarially sound. There is nothing in the record
that would indicate that the trend factor used by the Applicants is excessive,
inadequate, or unfairly discriminatory. Applicant witness William Whitmore
testified that based on subsequent information, he would have used a higher
trend factor. The Applicants did not amend the filing to reflect a higher
trend factor, and there is insufficient evidence in the record to find
that the trend factor used is inadequate.

C. Adjustments to Claims

Claims over $100,000 - The methodology used, as adjusted by the response
to the Superintendents Oral Discovery Request, appears reasonable.
Because the number and amount of large claims tends to fluctuate significantly
from year to year, the Applicants substituted an estimate for the actual
amount. This approach appears reasonable.

Bureau Rule 850 - The HealthChoice plan meets the statutory definition
of a managed care plan[6]
because it utilizes a network of providers and pays lesser benefits for
non-network providers. Rule 850s access standards requires full
coverage for non-network providers in situations where a network provider
is not available within a specified distance of the insureds home.[7] Applicant witness James Parker testified that the Company faced
increased costs resulting from the application of Rule 850. The factor
used by the Applicants to reflect these increased costs was based on business
judgment and appears reasonable. There is no evidence in the record that
the factor is excessive, inadequate, or unfairly discriminatory.

Other Adjustments - The adjustment for Professional Pay Adjustments reflects
changes in Anthems contracts with providers. The Patients
Bill of Rights adjustment to HMO rates reflects the anticipated impact
of statutory changes enacted in 2000. Both adjustments appear reasonable.
There is no evidence in the record that either adjustment is excessive,
inadequate, or unfairly discriminatory.

D. Administrative Expenses

There is no evidence in the record that would indicate that the administrative
expense factor is unreasonable or that the new allocation system is unfair
or inequitable. This is the first Anthem rate filing in several years
that based the administrative expense factor on actual expense allocations.
The Superintendent intends to review the expense allocation system as
part of the next financial exam of the Company pursuant to the provisions
of 24-A M.R.S.A. § 221.

E. Investment Income

Investment income appears to be appropriately credited in the rate calculation,
though it was not reflected in the financial results in the Applicants
filing Exhibits VIII, IX, and X (Applicant Exhibit 3).

F. Profit

The profit margin target for this line of business is higher than the
percentage utilized for Anthem as a whole in the Comparative Premium Rate
Analysis prepared by the actuarial consulting firm of Milliman and Robertson
for the then Blue Cross/Blue Shield of Maine, as required by Maine law
in support of the conversion and acquisition proceedings (Consolidated
Docket No. INS-99-14).[8] Applicant witness James Parker testified that the higher risk
on this line of business (non-group) warrants a higher profit margin.
It is reasonable and prudent for profit margins to be correlated to risk.
High deductibles and guaranteed issue requirements would tend to increase
volatility and claim severity for this line of business. These effects,
however, must be weighed against other considerations. The Comparative
Premium Rate Analysis was prepared in 1999 at a time when Anthems
predecessor had been unprofitable and in financial distress. In contrast,
most recently Anthem has been able to operate profitably and to contribute
to the Companys surplus position as demonstrated in year-end filings
made with the Bureau of Insurance. Furthermore, Applicant witness James
Parker testified as to the premium levels that Anthems large group
customers had been able to negotiate whereby Anthem anticipated achieving
lower profit margins than projected for the non-group lines. Individuals
covered under the non-group lines that are the subject of these proceedings
do not have the same ability to negotiate lower premiums with Anthem.
While it would not be proper or prudent for the Superintendent to require
Anthem to write its non-group business at a loss,[9] or with inadequate rates in violation
of Maine law (see 24-A M.R.S.A. § 2736
establishing that rates not be inadequate, excessive, or unfairly
discriminatory), these considerations warrant a lower profit margin
than reflected in the Companys proposed rates.

G. Other Rate Components

The provisions for commissions and premium tax are straight-forward and
appropriate.

H. Non-Compliance with Bureau Rule 940

Rule 940 limits the difference between rates for different benefit plans
to the maximum possible difference in benefits.[10] The Applicants are not in compliance with the requirements of
Rule 940. The impact of achieving compliance, based on the Applicants
filing Schedule VIII (Applicant Exhibit 13), does not appear severe. Furthermore,
the impact does not need to be as severe as illustrated by the Applicants,
since Schedule VIII makes greater adjustments than are necessary to achieve
compliance.

I. Contract Type Factors

The factor applied to individual rates to produce full family rates [2
adults + child(ren)] as stated in the Applicants filing (Applicant
Exhibit 1A) is 2.65. However, for the HealthChoice plans with no coinsurance
($2,250, $5,000, $10,000, $15,000, and $25,000 deductibles), the ratio
of the proposed full family rate to the proposed individual rate is 2.671.

J. Mixed-Age Contracts and Age-Related Rate
Changes

Anthem states that the introduction of a new billing system renders the
Company unable to administer rating in the same manner as previously.
While the Applicants cite administrative savings as the reason for the
new system, the Applicants witness testified that the Company does
not project any administrative savings for the individual line as a result.

Although the Superintendent could require the Applicants to either maintain
the old system or find some other way to maintain the prior rating methods,
such action is not warranted. Recognizing that mixed-age rates are relatively
more accurate, the inaccuracy introduced by rating based only
on the policyholders age is insignificant compared to the subsidies
among different age groups that result from the statutory community rating
bands. Similarly, the delay in implementing age-related increases is insignificant
given the broad age bands used.

The issue, therefore, is how these rating changes should affect the rates,
if at all. Despite Anthems stated intent not to recoup the lost
revenues, the Companys filing has the effect of recouping those
lost revenues resulting from the mixed-age contract change.

The change in the effective date of age-related increases will also result
in much more frequent occurrences of double increases - i.e.
the policyholder gets a 20% or 25% age increase at the same time as a
general increase. Applicant witness William Whitmore testified that this
would not adversely affect persistency, but the basis for that conclusion
is not clear. It is reasonable to conclude that lapses are more likely
to result from a large rate increase than from a series of smaller ones,
even if the ultimate premium is the same. Nonetheless, this concern does
not rise to the level where it is appropriate to require the Company to
implement age-related increases sooner.

Another issue concerns implementation of the change relating to mixed-age
contracts. The Applicants filing states that they will offer policyholders
the opportunity to make the younger spouse the policyholder and the Company
assumes all will do so. The basis for that conclusion is not clear.

K. Supplemental Accident & Preventive Care
Rider

In response to discovery, the Applicants state that they have never split
out the experience for the Supplemental Accident & Preventive Care
Rider from the base policy. Applicant witness William Whitmore testified
that the Company is working on this and will have the data in about a
month. Since the filing is designed to produce the required revenue for
the line as a whole, the issue here isnt really adequacy or excessiveness
of the rates, but equity between policyholders who have the rider and
those who dont. The methodology used (as demonstrated in revised
Applicant Exhibit VIII) appears appropriate at this time.

IV. FINDINGS AND CONCLUSIONS

On the basis of the record of the proceedings, the Superintendent makes
the following findings and conclusions:

Anthem and Maine Partners insure a majority of the population currently
insured under individual health insurance policies in Maine. The Superintendent
considers this market share dominance relevant to the filing and the
subsequent evaluation of the proposed rates.

Anthem and Maine Partners have established, in accordance with accepted
actuarial principles and practices, that their rates will yield loss
ratios of at least 65% in compliance with the requirements of Maine
law under the provisions of 24-A M.R.S.A. § 2736-C (5).

Anthem is not in compliance with Bureau of Insurance Rule Chapter
940.

make the subsidy from HealthChoice to the individual HMO line revenue-neutral based on projected enrollment;

make the minimum adjustments necessary to comply with Bureau of Insurance Rule 940 in a revenue-neutral manner;

use a factor of 2.65 for all contracts covering two adults with one or more children or justify the use of a different factor; and

amend the profit margin to three percent (3%) before consideration of revenues lost due to administrative changes with respect to mixed-age contracts and the age-related rate changes.

V. ORDER

Pursuant to the provisions of 24-A M.R.S.A. §§ 2736 and 2736-B, the
Superintendent hereby ORDERS as follows:

Approval of the filed rates for the Anthem HealthChoice non-group
product lines and Anthem and Maine Partners individual HMO product lines
is DENIED.

Revised rate filings may be submitted for review on or before November
18, 2002, and shall be APPROVED, effective January 1, 2003, if found
by the Superintendent to be consistent with the terms of this Decision
and Order, and the Required Adjustments to Proposed Rates specified
in Exhibit A attached hereto and incorporated herein by reference.

Anthem and Maine Partners shall take vigilant measures to ensure
that affected policyholders under mixed-age contracts are aware of their
opportunity to make the younger spouse the policyholder by means of
initial direct mail notification, follow-up direct mail notification
where a policyholder is non-responsive to the initial mailing, and a
single telephone notification if a policyholder continues to be non-responsive.
This requirement applies both to those policyholders initially affected
by the change and to those who are affected in the future as the older
spouse reaches an older age band. Anthem and Maine Partners also shall
take similarly vigilant measures to ensure that those applying for family
coverage are aware of the savings available by making the younger spouse
the policyholder.

Anthem and Maine Partners shall undertake in all future rate filings
to prepare exhibits and schedules on consistent bases, as appropriate.
The assumptions underlying each exhibit and schedule shall be disclosed.
Where different assumptions are used for different purposes, a clear
explanation shall be provided. Unless readily apparent, the source of
each item in each exhibit and schedule shall be shown.

Anthem and Maine Partners shall continue to submit all informational
filings required pursuant to prior Decisions and Orders of the Superintendent
including but not limited to the following requirements established
in the Superintendents November 30, 2001, Decision and Order issued
in Docket Nos. INS-01-2532 and INS-01-2534:

(i) Anthem and Maine Partners shall include in all future rate filings
a comparison of actual to projected loss ratios for recent filings
as well as an analysis of any disparities and what improvements, if
any, they have made to the methodology to reduce the likelihood of
similar disparities in the future.

(ii) Anthem and Maine Partners shall include in all future rate filings
projected changes in enrollment and shifting from one plan to another
and an analysis of the impact that these changes will have on the
experience.

VI. NOTICE OF APPEAL RIGHTS

This Decision and Order is a final agency action of the Superintendent
of Insurance within the meaning of the Maine Administrative Procedure
Act. It may be appealed to the Superior Court in the manner provided by
24-A M.R.S.A. § 236, 5 M.R.S.A. § 11001, etseq. and M.R. Civ. P. 80C. Any party to
the proceeding may initiate an appeal within thirty days after receiving
this notice. Any aggrieved non-party whose interests are substantially
and directly affected by this Decision and Order may initiate an appeal
within forty days of the issuance of this decision. There is no automatic
stay pending appeal; application for stay may be made in the manner provided
in 5 M.R.S.A. § 11004.

PER ORDER OF THE SUPERINTENDENT OF INSURANCE

DATED: November 8, 2002

__________________________________
ALESSANDRO A. IUPPA
Superintendent

EXHIBIT A

REQUIRED ADJUSTMENTS TO PROPOSED RATES

Step 1. Adjust revenue at current rates
in Exhibit I Revised (in Applicant Exhibit C-18) to reflect projected
enrollment (both increased number of contracts and plan shifts). For HealthChoice,
this is based on calculations from revised Schedules II and IV (Applicant
Exhibits C-10 and C-11). Multiply current rates by projected enrollment
and divide the total by the total based on current enrollment. Apply this
ratio to the Revenue @ Current Rates in Exhibit I Revised.
For HMO, no plan shifts are projected, so only a volume adjustment is
needed. [11]
A 30% enrollment decrease should be used.

Step 2. Adjust projected claims to reflect
projected enrollment (both increased number of contracts and plan shifts).
For HealthChoice, this is based on calculations from the first expanded
Exhibit XIV (attached to Response to First Discovery Request of the Superintendent
in Hearing Officer Exhibit 1). (As noted in the footnote referenced above,
the Superintendent interprets the second revision to be inaccurate.) Projected
claims in Exhibit I Revised should be increased in proportion to the projected
increase in enrollment (3.7% per Exhibit XIV and Schedules II and IV)
and then decreased by a factor reflecting the smaller claims per contract
due to plan shifts to higher deductibles. This factor is calculated from
Schedule XIV by dividing the average claim based on projected enrollment
by the average claim based on current enrollment. The average claim is
determined by dividing total claims by total enrollment. For HMO, no plan
shifts are projected, so only a volume adjustment is needed. As noted
above, a 30% enrollment decrease should be used.

Step 4. Adjust the profit margin in Exhibit
I Revised to be three percent (3%).

Step 5. Deduct $641,000 from HealthChoice
required revenue in Exhibit I Revised and $5,000 from HMO. Since Schedules
II, IV, and V (Applicant Exhibits C-10, C-11, and C-12) automatically
adjust rates for non-mixed-age contracts to make up for reductions in
mixed-age contracts in order to achieve the desired increase in revenue,
this amount needs to be deducted from the revenue requirement in order
to avoid recoupment. The $641,000 and $5,000 figures are from the revised
Exhibit VIII submitted in response to the Superintendents Oral Discovery
Request (Applicant Exhibit C-13). No adjustment needs to be made for the
change in the effective date of age increases as Schedules II, IV, and
V do not adjust for this.

Step 6. In Exhibit I Revised, as further
amended by Steps 1 through 5 above, divide the total required revenue
by the revenue at current rates, as adjusted in Step 1 above to reflect
projected enrollment, to get the average rate increase before subsidy.

Step 7. Adjust the result derived from
Step 6 above to reflect the HMO subsidy. Increase the HealthChoice revenue
by one percentage point. Determine the revenue-neutral HMO subsidy by
dividing 1% of the HealthChoice revenue at current rates, as adjusted
in Step 1 above, by the HMO revenue at current rates, as adjusted in Step
1 above. Subtract this result from the HMO average rate increase before
subsidy. The resulting HealthChoice and HMO average rate increases after
subsidy are the percentage increases to be targeted, as described in Step
9 below.

Step 8. Unless justification is provided
for the use of a 2.671 factor for full family rates for HealthChoice plans
with no coinsurance, a factor of 2.65 should be used in Schedule II.

Step 9. Determine an adjustment factor
that when applied to the proposed rates in Schedules II, IV, and V [with
Schedule II adjusted per Step 8 above] would result in percentage increases
in revenue based on projected enrollment (i.e., the increase in the product
of 2003 rates and projected enrollment over the product of current rates
and projected enrollment) equal to the rate increases targeted in Step
7 above.

Step 10. Further adjust the rates as adjusted
in Step 9 above to achieve compliance with Rule 940. The necessary adjustments
are as follows:

The difference between the monthly rate at ages 55+ for the $4000
deductible and the $5000 deductible must be capped at $800/12. (Because
the $4000 deductible plan has coinsurance and the $5000 deductible plan
does not, the difference in benefits can never be $1000. The maximum
difference in benefits would be for $5000 in covered expenses, for which
the $4000 deductible plan would pay $800 and the $5000 deductible plan
would pay nothing.)

The difference between the monthly rate at ages 55+ for the $2250
deductible and the $5000 deductible must be capped at $2750/12.

The monthly rate at ages 55+ for the $2000 deductible must be capped
at the lesser of (a) the rate for the $4000 deductible plus $2000/12,
and (b) the rate for the $2250 deductible + $200/12. (Because the $2000
deductible plan has coinsurance and the $2250 deductible plan does not,
the difference in benefits can never be $250. The maximum difference
in benefits would be for $2250 in covered expenses, for which the $2000
deductible plan would pay $200 and the $2250 deductible plan would pay
nothing.)

The difference between the monthly rate at ages 55+ for the $1000
deductible and the $2000 deductible must be capped at $1000/12.

The difference between the monthly rate at ages 55+ for the $750
deductible and the $1000 deductible must be capped at $250/12.

The difference between the monthly rate at ages 55+ for the $500
deductible and the $750 deductible must be capped at $250/12.

The difference between the monthly rate at ages 55+ for the $300
deductible and the $500 deductible must be capped at $200/12.

The difference between the monthly rate at ages 55+ for the $150 deductible
and the $200 deductible must be capped at $150/12.

Step 11. Apply an adjustment factor to
increase the rate for the $5000 deductible to make the changes in Step
10 above revenue-neutral based on projected enrollment. Rates for all
other plans listed in Step 10 above should be simultaneously adjusted
to maintain the caps without over-adjusting.

[1] CAHC also applied for intervention as a matter of
right pursuant to the provisions of 5 M.R.S.A. § 9054 (1), which the Superintendent
denied. The Applicants filed a written opposition to CAHCs intervention
in the proceedings as a matter of right, pursuant to an Order of the Superintendent
issued September 16, 2002, establishing a deadline for making statements
in opposition to intervention.

[2] Upon request of Senator Treat, their being no objection
by the Applicants, the Superintendent issued an Order on September 26,
2002, allowing access to confidential information by the Senators
aide, William MacDonald.

[3] The Superintendent issued an Order on October 2,
2002, directing CAHC to promptly file with the Superintendent and to provide
the parties with a public, non-confidential version of the Discovery Request
with only Designated Confidential Information redacted. CAHC made that
filing on October 10, 2002.

[4] In substance, the Superintendent reiterated the
scope of proceedings as stated in the Notice of Pending Proceedings and
Consolidated Hearing as follows:

The purpose of the hearing is to consider whether the revised rates proposed
by Anthem and Maine Partners are excessive, inadequate, or unfairly discriminatory
as set forth in 24-A M.R.S.A. § 2736, and otherwise meet the requirements
of the Maine Insurance Code and regulations promulgated thereunder.

[5] Initially, the Applicants used the projected enrollment
in determining the administrative expense component of the required revenue,
but the result was combined with claims projected assuming static enrollment.
In the response to the Superintendents Oral Discovery Request, the
Applicants revised the methodology to determine all components assuming
static enrollment. The result is internally consistent, but does not reflect
the anticipated improvement in experience due to plan shifts.

[8] The Comparative Premium Rate Analysis is in the
record of these proceedings as part of Hearing Officer Exhibit 1.

[9] While there are good public policy arguments for
requiring individual products to be subsidized, requiring the subsidy
to come only from Anthem would put the Company at a competitive disadvantage
in the group market.

[10]See, Rule 940,
§ 8(B). For example, if two plans are identical except that one has a
$300 deductible and the other has a $500 deductible, the difference in
the annual premiums cannot exceed $200.

[11] There is a discrepancy in the Applicants
Exhibits as to how much of an enrollment decrease is anticipated. The
Applicants original filing showed a 30% decrease in HMO enrollment
from the experience period (Y/E 3/31/02) to the rating period (Y/E 12/31/03).
This appears in Exhibit I, Exhibit XIV as expanded in response to the
First Discovery Request of the Superintendent, and in Schedule V as expanded
also in response to the First Discovery Request of the Superintendent.
The 30% enrollment decrease also was assumed in Exhibit IX. Exhibit XIV
was amended in response to the Second Discovery Request of the Superintendent
to show only a 14% decrease. The Superintendent interprets the first expanded
Exhibit XIV to be correct and that the corrected version contained
an error. The top portion of Exhibit XIV, showing HealthChoice data, is
labeled current and projected contract enrollment. The bottom
portion, reflecting HMO, is labeled current and projected member
enrollment. However, the numbers in the first version correspond
to the number of contractsshown
in Schedule V and Exhibit IX. The revised version of Exhibit XIV shows
a number corresponding to the number of members
in Exhibit IX. For these reasons, the Superintendent interprets the revised
version as actually comparing projected members
to current contractsto arrive at
the 14% decrease. The revised Schedule V provided in response to the Superintendents
Oral Discovery Request still shows a 30% enrollment decrease. The revised
Exhibit IX provided in response to the Superintendents Oral Discovery
Request still assumes a 30% enrollment decrease. The revised Exhibit I
provided in response to the Superintendents Oral Discovery Request
does not use projected enrollment. A 30% enrollment decrease is therefore
assumed.